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Rutgers, State University v. American Athletic Conference

United States District Court, Third Circuit

October 31, 2013

RUTGERS, THE STATE UNIVERSITY, Plaintiff,
v.
AMERICAN ATHLETIC CONFERENCE, Defendant.

MEMORANDUM OPINION

MICHAEL A. SHIPP, District Judge.

The Big East Conference, which subsequently changed its name to the American Athletic Conference ("Conference, " "The Big East" or "Defendant") moved to dismiss, or in the alternative, to transfer this case to the District of Rhode Island. (Def.'s Mot., ECF No. 14-1. Rutgers, the State University of New Jersey ("Plaintiff" or "Rutgers") opposed and cross-moved to amend. (Pl.'s Opp'n, ECF No. 18-1.) Defendant filed a Reply. (Def.'s Reply, ECF No. 19. Plaintiff subsequently filed correspondence advising the Court of additional case law post-dating its brief. (ECF No. 20.) Defendant filed a response. (ECF No. 21-1.) Thereafter, Plaintiff moved to compel the Defendant to enter a deposit with the Court. (ECF No. 24.) Defendant opposed. (ECF No. 25.) Plaintiff filed a Reply. (ECF No. 26.) The Court has carefully considered the Parties' submissions and decided the matter without oral argument pursuant to Local 78.1. For the reasons stated below, and for other good cause shown, Defendant's Motion to Dismiss is denied and its alternative request to transfer is granted. Plaintiff's cross-motion to amend and motion to enter a deposit with the Court are administratively terminated as moot.

I. Background

This action arises from a dispute regarding the Parties' rights and obligations under the Conference's Bylaws. ( See Def.'s Mot. 1.

A. Allegations in the Complaint

The Complaint provides the history of Rutgers's membership in the Conference and contains a number of assertions regarding the Conference's alleged selective treatment of various withdrawing members. According to the Complaint, Rutgers joined the Conference as a full member in 1995. (Compl. ¶ 9.) The rights and obligations of the Conference members are governed by the Bylaws, which were amended several times, including an October 17, 2011 amendment that provided for a $10 million Withdrawal Fee for a football school. ( Id. ¶¶ 34-35. However, the Withdrawal Fee provision was linked to an automatic qualifier designation.[1] Plaintiff's Complaint alleges that the elimination of the automatic qualifier designation resulted in a Withdrawal Fee reduction to $5 million.[2] ( Id. ¶¶ 37-39.) As such, Plaintiff alleges that as of June 26, 2012, it had a vested right to pay a $5 million Withdrawal Fee if it were to leave the Conference. ( Id. ¶ 39.) Plaintiff further alleges that the Conference has "selectively decided not to enforce its Bylaws with respect to Withdrawing Members as to the 27 months notice provision and/or the Withdrawal Fee." ( Id. ¶ 24.) For example, Rutgers alleges that the Conference did not require Texas Christian University ("TCU") to pay the entire Withdrawal Fee and did not require Notre Dame, Syracuse, Pittsburgh, TCU or West Virginia University to provide 27 months notice as set forth in the Bylaws. (Compl. ¶¶ 16, 19-20, 23.) Plaintiff additionally alleges that it lost the value of the large crowd a home game against TCU would have drawn. (Compl. ¶ 52.

The Conference again amended its Bylaws during its November 12-13, 2012 meeting. Paragraphs 41 through 43 of the Complaint allege

41. On or about September 22, 2012 and in anticipation of the November 12-13, 2012 meeting of Big East Presidents, the Big East circulated proposed amendments to the Bylaws to all Big East Presidents. The Big East also circulated a summary of the proposed amendments, prepared by counsel, which did not include any mention of the change in the Withdrawal Fee, nor did it mention the arbitrary removal from the Bylaws of the modified Withdrawal Fee in the event that the Big East loses its "automatic qualifier" status for the purpose of the Bowl Championship Series.
42. When a vote was called for on November 13, 2012 regarding the proposed amendments to the Bylaws, including the increase of the Withdrawal Fee for football schools from $5 million to $10 million, Rutgers' President was not in attendance and therefore did not vote in favor of the amendments. However, Rutgers' Athletic Director was present, voiced objection to both the procedure and substance of the proposed amendments, but was not allowed to cast a vote in opposition.
43. Upon information and belief, the amendments were adopted by majority vote of the Presidents in attendance.

( Id. ¶¶ 41-43.

Plaintiff's Complaint seeks a declaratory judgment voiding the Bylaws and "permitting Rutgers to withdraw from The Big East prior to July 1, 2015" or, alternatively, "declaring that The Big East has waived Rutgers' obligation to abide by the 27 months notice provision and the requirement of a Withdrawal Fee." (Compl. ¶ 72.) Rutgers also alleges a breach of contract claim for its share of the Conference's alleged collection of approximately $40 million in withdrawal fees and its share of presently uncollected withdrawal fees. (Compl. ¶¶ 83-87.) Rutgers further alleges a breach of contract as it relates to the loss of the TCU game, which Rutgers claims resulted in damages "in the amount of $1.3 million." (Compl. ¶¶ 96-101.

B. 2012 Bylaws Provision

The November 2012 Bylaws contain the following forum selection clause provision

11.01 Forum Selection.

The Conference and the Members consent and agree that any claim a Member or Members may have against the Conference, which relates in any way to or arises out of these Bylaws, shall be submitted to binding arbitration to be held by a single arbitrator approved by the Board by a vote of at least three-fourths of all Directors present and eligible to vote. Such arbitration shall be held in accordance with the Commercial Arbitration Rules of the American Arbitration Association, provided, however, that any such arbitrator shall allow discovery in accordance with the Federal Rules of Civil Procedure. The Board may choose another arbitration procedure by a vote of at least three-fourths of all Directors present and eligible to vote. Any such arbitration shall be held in the city in which the Conference's primary executive offices are located. The decision of the arbitrator shall be final and enforceable against the Conference in a court of competent jurisdiction in the state in which the Conference's primary executive offices are located and shall be binding upon the Member(s) asserting such claim. Each Member also expressly agrees that any such claim against the Conference, to the extent not finally resolved through arbitration, shall be brought in a court of competent jurisdiction in the state in which the Conference's primary executive offices are located. Notwithstanding any provision of this Article 11.01, the commencement of any arbitration by any Member against the Conference in the jurisdiction where the Conference's primary executive offices are located, or the transfer of any action brought in another forum for arbitration in the state in which the Conference's primary executive offices are located, shall be for the limited purposes described above and shall not be deemed to constitute consent to jurisdiction in that state with respect to claims against that Member by the Conference or by other Members.

(Aresco Decl. Ex. A. §11.01, ECF No. 14-2.

II. Parties' Positions

According to Defendant, the arbitration provision contained in Section 11.01 of the Bylaws constitutes a valid agreement to arbitrate. (Def.'s Mot. 5) (citing 9 U.S.C. § 2.) Since Section 11.01 of the Bylaws selects Rhode Island as the forum for any litigation to enforce a binding arbitration award, the District of New Jersey cannot compel arbitration. (Id. at 6 n.3 Therefore, Defendant requests the Court to dismiss the action without prejudice or, in the alternative, to transfer the case to the ...


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